What should a dentist know before selling a dental practice in Canada?

What is a buyer paying for when they buy a dental practice?

A buyer is paying for a practice they believe they can operate after you leave, not simply for the equipment you bought over your career.

A buyer will examine the patients' experience, the team, the premises, the condition of the equipment and the records that show how the practice works. They will also ask what happens when the dentist whose name is on the door is no longer treating patients.

Goodwill is the part that cannot be packed into a moving van. It includes the practice's reputation, its established relationships and its ability to continue serving patients. It is not a promise that patients will stay. A buyer will want to understand whether patients see other clinicians, whether recalls and referrals are handled consistently, and how a change of owner will be explained. A practice dependent on your personal relationships may need a longer introduction to its next owner. The same questions, seen from the other side of the table, are covered in buying a dental practice.

Patient records matter to continuity of care, but they are not ordinary merchandise. Dentists must deal with custody, access, privacy, retention and transfer under the rules that apply where they practise. In Ontario, the Royal College of Dental Surgeons of Ontario (RCDSO) has guidance on the selling dentist's responsibilities for records, including written notice to patients. In Quebec, a regulation of the Ordre des dentistes du Québec (ODQ) sets binding rules when a dentist transfers records or ceases to practise (CQLR c. D-3, r. 16). In British Columbia, the role once held by the CDSBC now sits with the College of Oral Health Professionals. Have your lawyer or notary apply the rules in your province; do not assume signing a purchase agreement settles them.

Equipment has a different role. A buyer will ask whether chairs, imaging systems, sterilisation equipment and software support the work they intend to do, what maintenance records exist and what may soon need replacing. An item can still function while creating an immediate expense for a new owner, which is why the equipment replacement cycle you kept during your career matters now. Similarly, a lease can make a location valuable or make the transaction difficult. Remaining term, renewal options, permitted use, assignment terms and the landlord's consent all deserve attention before a buyer relies on the premises.

Staff are not an accessory to the sale. They know the patients and often carry the daily systems that make the practice usable. A buyer needs to understand roles, contracts, accrued obligations and which employees are likely to stay, without treating anyone's continued employment as assured. Patient care and employment obligations should shape the transition agreement, rather than being left to a conversation after closing.

The table is a preparation list, not a valuation method. A qualified practice valuator and the parties' professionals can assess a particular practice.

Why do the years before a dental practice sale matter?

The years before a sale give you time to make the practice understandable, resilient and less dependent on your presence.

A buyer can review a good month. They will place more confidence in a pattern they can examine across financial statements, scheduling records and explanations for unusual periods. Steady production does not mean pushing treatment to improve a sale document. It means that the clinical work and the way it is recorded give an accurate picture of what the practice can support. Reconcile collections and production consistently, document material changes and make sure the reported picture agrees with the corporation's books where applicable.

Look at what happens when you are away. Do staff know who handles a patient complaint, an equipment failure or an incomplete treatment plan? Are referral pathways and follow-up procedures written down? If the answer depends on calling you, a buyer is being asked to purchase your availability as much as a functioning practice.

A clean lease means more than having a copy in a folder. Ask your lawyer to identify the actual tenant, the remaining term, renewal and assignment provisions, use restrictions, restoration obligations and any personal guarantees. Find out what the landlord must approve if assets change hands or control of a corporation changes. Resolving an ambiguity before an offer is easier than asking a landlord to resolve it against a closing deadline (see also leasehold improvements and a second location).

The same principle applies to ownership records. If you practise through a professional corporation, keep its minute book, shareholder arrangements and financial statements current, as discussed in the professional corporation and retained earnings. Confirm who owns the equipment, the leasehold improvements, any trademarks and any life insurance policy. A transaction is harder to plan when the documents and daily assumptions disagree.

Make a patient-care transition plan before discussing a closing date. Identify treatment in progress, commitments about follow-up and any unusual payment arrangements. Decide how a successor could be introduced without implying that patients must remain. The RCDSO's guidance on continuity of care during a sale recommends planning for treatment completion and possible retreatment, and considering a period when both dentists work at the practice.

Preparing early also gives you room to reconsider your own timetable. Perhaps you would prefer to reduce clinical days gradually, or perhaps the practice needs another clinician who can carry work independently. For the wider financing questions that arise throughout a dental career, see financing a dental career.

Should a dentist sell the practice's assets or shares of a professional corporation?

An asset sale and a share sale transfer different things, so your accountant and lawyer or notary should assess both before you agree to terms.

In an asset sale, the buyer purchases specified items or rights from the seller. These may include equipment, goodwill and other business assets, subject to the records, privacy, regulatory, lease and contractual rules that apply. If a professional corporation sells the assets, that corporation generally continues to exist after the sale unless further steps are taken. It may retain liabilities, sale proceeds and assets the buyer did not acquire.

In a share sale, the buyer purchases shares of the corporation that operates the practice. The corporation continues to own what it owned before closing unless the parties arrange otherwise. The buyer therefore looks closely at its obligations and history as well as its practice assets. Provincial rules about ownership and operation of a dental professional corporation also matter. A dentist should not assume every interested purchaser can acquire the shares on the proposed terms.

Neither structure has one predictable tax outcome. The Canada Revenue Agency's guidance on selling a business explains that an asset agreement may allocate amounts to particular assets and goodwill, and that different tax consequences can follow. The lifetime capital gains exemption, in section 110.6 of the Income Tax Act, can apply when an individual sells qualifying small business corporation shares and meets its conditions. The limit is set by the Act and changes; check it with your accountant. The exemption does not apply automatically because the seller is a dentist or because the practice is incorporated. Your accountant must test the corporation and its shares on their actual history; your lawyer or notary must make the documents match the intended transaction.

The parties may also discuss a transition period in which you remain to practise. That can introduce patients to the new dentist and help complete treatment, but it needs clear terms: clinical responsibilities, compensation, schedule, records access and what happens if either party wants to change the arrangement. Your ability to keep working should not be assumed from an informal conversation.

An associate may instead buy into or acquire the practice over time. This can give both dentists time to test how they work together, while creating questions about control, future decisions, disability, a change of plans and how payments will be made. A vendor take-back, in which the seller accepts part of the purchase price later under agreed terms, is another possible structure. It exposes the seller to the buyer's ability to pay. Security, default provisions and enforcement are legal matters, not details to settle with a handshake.

Ask what you will receive at closing, what remains contingent, who carries each obligation and what happens if the buyer's plans change. Have the accountant model the after-tax consequences of the arrangements actually under consideration before treating two offers as equivalent.

What happens to a participating whole life policy when a dentist sells?

A policy does not disappear when the practice is sold; its owner, beneficiary and place in the sale must be identified separately.

Start with the policy documents. The person whose life is insured, the policyowner and the beneficiary may be different. Only the owner holds the contractual rights, including the ability to request a policy loan, subject to the contract and any assignment or beneficiary restrictions. Confirm the recorded ownership, beneficiary, current cash value, adjusted cost basis and outstanding loan balance with the insurer.

If you own the policy personally, selling corporate shares or practice assets does not, by itself, sell your personal policy. Still, revisit why you hold it. Coverage arranged partly around practice obligations may have a different purpose after those obligations end. A buyer's request that you remain for a transition, a vendor take-back or changed family needs may affect your beneficiary and coverage decisions. Do not surrender a policy merely because the practice has been sold: surrender can have tax consequences, and replacing coverage later may require new underwriting.

If the professional corporation owns the policy and the corporation sells assets, the policy normally remains with the corporation unless it is included in a separate arrangement. The corporation also receives any policy loan made to it. Its shareholder cannot treat that advance as personal cash without a separate transaction and an assessment of that transaction's tax consequences.

If you sell shares, the corporation remains the policyowner. The buyer acquires control of the corporation, and with it the decisions about its policy, unless the policy is moved beforehand. A buyer may not want a contract on the departing dentist's life. Moving it to you personally or to another corporation before the sale is not a clerical change: the transfer is a disposition of the policy that can create taxable income, and a transfer for less than its value can raise a shareholder benefit concern. The policy's value may also affect both the negotiated terms and whether the shares meet the conditions for the lifetime capital gains exemption, a point examined in whether a corporate policy affects the small business share test. The tax is for your accountant to calculate, and selling the company and the contract examines the ownership question in more detail.

Ask the insurer for figures as of a stated date, then give the documents to your accountant and lawyer or notary well before closing. Ask them to address who will own the contract afterward, who should receive its death benefit, whether a beneficiary's consent or a lender's release is needed, and whether the proposed transfer changes the tax analysis.

How could a policy built over a career affect negotiations and retirement timing?

Accessible policy cash value may give a seller another financing option, but it cannot turn an uncertain sale into a certain retirement income.

The financing idea known as The Infinite Banking Concept®, set out by Nelson Nash in Becoming Your Own Banker® (2000), is first a concept about financing. His premise was that a family's need for financing is greater than its need for life insurance protection. A household finances a purchase either by paying interest to an outside lender or by paying cash and giving up what that cash could otherwise have earned. The aim is to think like a lender and, over years, build your own financing system for purchases and obligations in your life.

In Canada, the usual tool for this approach is a participating whole life policy issued by a Canadian insurer. It is insurance, not an investment. It has cash values guaranteed under its contract, provided the required premiums are paid; dividends may be declared but are never guaranteed. A policy loan is requested from the insurer, which confirms the amount available under the contract and its rules; an assignee's consent may be needed. The loan is itself a loan from the insurer, with interest. You plan repayments within the contract's terms. Financing is the purpose of the concept; the policy is a tool that may support it.

For a dentist approaching a sale, financing flexibility can matter in three distinct ways. First, if you have another source of accessible capital, you may have more room to consider an offer's timing and conditions instead of accepting it solely because you need cash immediately. Second, an advance could help cover a defined gap between leaving clinical work and the arrival of other retirement income, provided there is a credible way to manage the loan. Third, if an associate is purchasing over time, a seller might consider whether available capital gives them flexibility about the payment timetable. A policy loan to the seller does not finance the associate automatically, and any arrangement between seller and buyer requires its own documents and risk assessment.

Illustrative arithmetic only: suppose a personally owned policy has a cash value of $90,000 and, after reviewing its terms and any existing debt, the insurer agrees to advance $45,000. The seller plans to use $24,000 for a temporary household gap and hold $21,000 for another planned obligation. These invented amounts illustrate allocation, not an insurer's lending limit, a practice price or an expected result. Interest is additional, the loan is subject to the policy's actual terms, and the seller must still decide how it will be repaid.

If the corporation owns the policy, substitute "corporation" for "seller" in that example and stop there. The insurer's advance belongs to the corporate policyowner. Paying money onward to the dentist is another step for the accountant to assess.

Canadian Wealth Creation Centre Inc., the firm that provides the service and publishes the educational website IBC Financial, calls the long-term goal of relying less on commercial lenders for ordinary purchases Infinite Financial Sovereignty® (a registered trademark of Jose Salloum). It is a goal, not a promised result; a policy loan is itself a loan from the insurer, with interest.

What are the costs and risks of relying on a policy loan near a sale?

A policy loan offers a possible source of financing, but its interest, tax treatment and effect on coverage must fit a plan that still works if the sale is delayed.

The cost starts long before a loan request. Participating whole life requires steady premiums and takes years to build substantial accessible cash value, which is why capitalization comes before use. Its costs weigh most heavily in the early years, when surrendering can mean receiving substantially less than the premiums paid; the real costs of those years deserve a close look. A dentist who expects to sell soon cannot assume a newly purchased policy will supply meaningful closing or retirement liquidity.

Once a policy has value, a loan is still conditional on that value, the insurer's rules and the contract's restrictions. It is not guaranteed at any amount you choose. The insurer charges interest on what it advances. Unpaid interest may be added to the loan, leaving less room for later borrowing. An outstanding balance, including interest added to it, is deducted from the death benefit paid to beneficiaries. If indebtedness and other contract requirements are not managed, the policy can lapse; a lapse with a loan outstanding can also create a tax problem when little or no cash is received.

Canadian tax treatment deserves its own calculation. A policy loan is a disposition under section 148 of the Income Tax Act. The portion above the policy's adjusted cost basis immediately before the loan is included in income, as explained in when a policy loan becomes taxable. The adjusted cost basis changes over time and with transactions, so an earlier loan that produced no income does not establish the result of a later one. Under paragraph 60(s) of the Income Tax Act, repaying the policy loan that caused an income inclusion can give a deduction, within its limits. Ask the insurer for the adjusted cost basis and your accountant for the calculation before requesting an advance.

The policy's internal growth avoids annual taxation only while the policy remains exempt under section 306 of the Income Tax Regulations. That condition should not be replaced by a general claim that every policy transaction is tax-free. Nor should projected dividends be used as though they will certainly offset loan interest.

There is insurer risk as well. Assuris protects eligible Canadian whole life policyholders within limits if a member insurer fails, and it calculates that protection after policy loans. That protection has limits and is not a government guarantee.

Finally, compare the loan with the financing actually available to you: cash reserves, a suitable existing credit arrangement, changes to your sale timetable or a smaller temporary need. The comparison should include access, cost, tax, security and what happens if the practice does not sell when expected.

Who should not use this approach to prepare for a practice sale?

A dentist who needs near-term liquidity, cannot sustain premiums or does not want permanent life insurance should not rely on participating whole life to solve a sale problem.

The concept asks for patient financing habits: build capital over years, decide deliberately when to use it and repay advances so capacity can be available again. The contract asks for long-term funding. Neither is a substitute for a marketable practice, an emergency reserve, manageable debt or a retirement plan that survives a disappointing sale. If premiums would compete with payroll, tax obligations or necessary household spending, that constraint matters more than an illustration of future cash value.

It also may not fit a dentist whose primary need is temporary life insurance protection. The existence of a policy loan feature does not make the policy appropriate when permanent coverage is unwanted. Someone who will not monitor and repay an advance can find that flexible repayment becomes growing debt. Someone who expects to draw repeatedly to cover an ongoing income shortfall should test what happens if clinical income ends, the sale proceeds arrive late or an associate cannot make scheduled payments. See disability and the capital plan and risks and failure modes.

Corporate ownership adds a further suitability test. If the proposed share sale requires a policy to leave the professional corporation, the cost and tax consequences of doing so must be weighed against the reason it was owned there. Beneficiary restrictions, assignments and existing policy loans can narrow the choices further.

Start with the documents and the people responsible for them: a practice valuator where appropriate, your accountant for tax, your lawyer or notary for the sale and your insurer for contract figures. Then ask whether the policy has a job that remains useful after you leave dentistry. The author is paid commissions by insurers when a policy is bought. That is one reason to judge any proposed contract against your need for coverage, funding capacity, alternatives and sale timetable, rather than against a promised outcome.

Before any offer is signed, ask for and keep in writing:

• the insurer's statement of owner, beneficiary, cash value, adjusted cost basis and loan balance;
• your accountant's comparison of an asset sale and a share sale, including the tax on moving a corporate policy;
• your lawyer's or notary's reading of the lease, the records rules and the transition terms;
• a loan repayment plan that still works if closing is delayed.